Funding the future of African fintech

There’s no denying the impact fintech is having on Africa. It’s an opportunity that has arisen thanks to the prevalence of smartphone technologies and lack of access to banking in the continent, but who’s leading the charge?

Research by management consultancy firm Legato Consultancy has exposed the exploding opportunity of fintech in Africa, citing research carried out in 2015 that showed 88 per cent of Africans didn’t have a bank account but 183 million people already owned a phone – or a ‘mobile wallet’.

Statistics such as this prompted a handful of innovators to turn their attention to mobile technologies as a means of managing their money, whether they are looking for somewhere to store the wages they’ve earned, sending currency to family living in other regions, or hoping to run their business more effectively.

This investment for home-grown companies to create new solutions ensures everyone has access to money, breaking down the barriers and contributing to an economic boom across the entire region.

Investment opportunities

These innovators are being supported by a growing community of venture capitals (VCs), incubators and startup groups in the region. For example, AlphaCode is an incubator for next-generation financial services entrepreneurs. Although not set up solely for African fintech startups, it’s putting a lot of effort into supporting the growing market and launched a base in South Africa earlier this year to support 50 local companies trying to launch their products in the region.

Also, there are competitions that attempt to find the most promising talent in the continent. Swift’s Innotribe Startup Challenge and MasterCard’s Smart Path program are both focusing on fintech entrepreneurs to help develop the scene and make South Africa, Nigeria and Kenya hot fintech hubs of the future.

Inspirational people making inspirational products

These methods of finding the next big thing in fintech are obviously working because there’s no shortage of companies shooting to the top of Africa’s startup economy.

For example, Nigeria’s Interswitch is set to be the first African fintech startup to float in London and Lagos, with a valuation of $1bn. The company operates various banking services, such as ATMs, POS terminals, mobile phones, kiosks, web and bank branch facilities, alongside its core Paydirect web-based payment solution.

While Universal payment and trading platform BitPesa is just three years old, the Kenyan startup is so successful it’s now taken its money transfer service to Tanzania after raising $1.7m in capital from VCs including Pantera Capital, Bitcoin Opportunity Corp, Crypto Currency Partners, Future/Perfect Ventures and Stephens Investment Management.

BitX is embracing digital currency, allowing users to buy and sell Bitcoin using a digital wallet. It had raised $4m by mid-2015 and has since seen a cash injection from South-East Asia’s Venturra Capital at the end of the year. The company has launched its Bitcoin service in Nigeria, plus additional virtual card integration with Zazoo and airtime services for customers in South Africa, making it a truly Africa-wide innovation.

What’s clear about the African fintech startup scene is that everything has been innovated with inclusion in mind and this makes the impact of some of these companies much greater than you would notice in western Europe or Asia, for example. It’s certainly a sector to watch as we prepare for the Fintech Africa Awards in October, where the biggest and best fintech startups will be honoured for their contribution to the African economy.